UK data point to meager growth, public finances worsen

Fri Dec 21, 2012 5:34am EST
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By David Milliken and Olesya Dmitracova

LONDON (Reuters) - Britain's dominant services sector posted meager growth in October, which may be just enough for the economy as a whole to avoid contraction in the last three months of 2012.

However, public borrowing figures also released on Friday showed that finance minister George Osborne has a lot of catching up to do to meet updated forecasts published earlier this month given the poor economic outlook.

The Office for National Statistics said services output grew 0.1 percent on the month in October, recovering from a 0.6 percent drop in September.

However, this is far behind the 1.2 percent growth that the sector enjoyed in the third quarter, which helped drive an overall 0.9 percent expansion in the economy as a whole in the three months to the end of September.

"It's not a great number but it is positive and it is better than the decline that had been expected," Ross Walker, an economist at Royal Bank of Scotland, said about October's services number.

"On the basis of all the published data it looks like the fourth quarter will be broadly flat, rather than negative."

Revised ONS figures published on Friday confirmed that third-quarter gross domestic product growth was the strongest since the third quarter of 2007. But much of that reflected a one-off boost from the London Olympics and a rebound from the second quarter when an extra public holiday dented output.

GDP in the third quarter was unchanged on the year, a small revision from the fall that the ONS had previously estimated.   Continued...

A man sits on a wall in the Canary Wharf financial district of London, April 1, 2009. REUTERS/Simon Newman